LONDON — Ofcom today published its annual Communications Market Report 2007 which
reveals new trends in the UK’s ?0bn electronic communications sector.
UK consumers now spend 50 hours per week on the phone, surfing the internet,
watching television or listening to the radio. Average daily internet use in
2006 (36 minutes) was up 158% on 2002 and time spent on the mobile phone
(almost 4 minutes per day) was up 58%. Time spent watching TV was down 4% at
3 hours and 36 minutes, listening to radio was down 2% at 2 hours and 50
minutes and time spent on a fixed line phone was down 8% at 7 minutes.
While consumers are getting more out of their communications services, the
amount they are spending on them continues to fall. In 2006, average
household spend on communications services was ?2.65 per month, down from
?4.03 in 2005.
Ofcom’s 330 page report shows how consumers are using new digital
communications services to take control of how, when and where they access
and use communications services. In particular:
The range of services and devices now available to children (8-15 year
olds) in the UK is rapidly changing what they do with their time. Over 75%
of 11 year olds now have their own television, games console and mobile
phone. Some 15% of 13 to15 year olds and 7% of 10 year olds also have their
own webcam.
Fewer children are playing console and computer games (61% regularly did
so in 2005 down to 53% in 2007), watching videos and DVDs (59% did so
regularly in 2005 and 38% in 2007) and listening to radio (40% listened
regularly in 2005 and 20% in 2007). Instead, they are using their mobile
phones more often (50% regularly did so in 2005 compared with 53% in 2007),
surfing the internet (47% regularly in 2005 to 52% in 2007) and using MP3
players (20% regularly in 2005 to 28% in 2007).
Older people are also consuming more media. The over 55s was the only age
group to increase its average radio listening between 2002 and 2007 (up
5.5%). And older people are not just increasing their use of traditional
media. Some 16% of over-65s use the web. These silver surfers spend an
average of 42 hours online every month, more than any other age group.
Indeed, far from being just a young person’s technology, one quarter of all
UK internet users are over 50 and the over-50s account for 30% of total time
spent online.
Among 25-34 year olds women spend more time using the internet than men.
In this age group, 2.18m young women users account for 55% of total time
spent online. By comparison, just 1.83m 25-34 year old men in the UK use the
internet.
THE NETWORKED NATION
The process of convergence – bringing technologies, platforms and devices
closer together – is connecting the nation as never before. Consumers can
now get live TV over their mobile, radio over their TV and make voice calls
on the internet.
There is now an even greater range of ‘bundled’ communications services
providing landline, broadband, digital television and mobile in a single
package. As a result, the number of consumers taking services in bundles
rose to 40% of the population by April 2007, up by a third over 12 months.
Consumers are increasingly using telephone services over the internet
offered by so-called VoIP providers. At the end of 2006 20% of respondents
to Ofcom’s survey said they were phoning online, up from 14% at the end of
2005.
And in the UK we are increasingly relying on our mobile phones. The report
shows that by the end of 2006 there were more than double the number of
mobile connections (69.7m) than landline connections (33.6m). More UK
households now rely just on a mobile phone (9%) than rely just on a landline
(7%) and for the first time, total mobile call minutes (82bn) accounted for
over one third of all call minutes (234bn).
Today’s consumers are using their mobiles for much more than just making
phone calls. Some 41% of mobile phone users regularly use their phone as a
digital camera, 13% use it for internet access, 10% listen to FM radio
broadcasts, and 21% use it as a mini games console. And in 2006 mobile users
in the UK sent 20% more texts than the previous year with an average of 12
text messages per mobile per week.
Wireless networks are allowing more people to access the internet
on-the-move. Some 11.2% (7.8m) of mobile phones now connect to a 3G network
(70% up on 2005 at 4.6m). The report also shows the number of Wi-Fi hotspots
in the UK, which enable broadband speed wireless internet access, is also
increasing. By April 2007 there were 11,447 hotspots compared to 10,339 a
year previously.
Digital television – in 80.5% per cent of UK homes by April 2007 – is
changing what, when and how we watch. One of the new services being used by
viewers in the 11.5 million subscription television households is
high-definition (HD) television. The report finds that, in the 450,000 homes
that have it, 33% of viewing time is spent watching in HD and 43% of those
surveyed said that they watch more television – especially premium content
such as films and sport – as a result of having HD.
And by April 2007, 15% of respondents said they had a digital video
recorder (DVR), almost double the number at the end of 2006. DVRs allow
users to record whole television series and to pause and rewind live
programmes.
Radio listeners have a much wider choice of stations and ways of listening
due to the growth of digital radio. In 2006 the total number of DAB digital
radio sets sold broke through the 5 million mark and 17.2% of UK homes now
have a DAB digital radio. DAB sets accounted for 18.6% of all radio sales in
2006 (1.8m sets) compared to 12.9% in 2005 (1.5m sets).
DAB is not the only way that consumers listen to digital radio. The report
finds that 33% of consumers have listened to the radio via digital
television (15% do so at least weekly), 21-22% listen online (12% at least
weekly) and 10-12% listen via their mobile phone (6% at least weekly).
A CHANGING INDUSTRY
Increased convergence of services and technologies is also changing the
shape of the communications sector and in particular industry revenues.
Television
UK television advertising revenue in 2006 fell by 2.2% on the previous
year to ?.5bn, the first fall since 2002. The decline in advertising
revenues coincides with greater availability and use of television-style
content online and the growth of digital video recorders (DVRs) that allow
users to skip adverts, putting even greater pressure on advertising
revenues. The report found that up to 78% of DVR owners regularly used them
to skip through adverts.
Declining advertising revenue is, however, increasingly being supplemented
by alternative sources of income. In 2006 subscription revenues increased to
?bn (approximately ?50 per subscription), up from ?.3bn in 2005.
Similarly, revenues from interactive services, such as quiz television
channels and participative voting in programmes, increased by 18.3% during
2006 to ?23m, although this new source of income may be affected in the
future as broadcasters review their approach to interactive TV.
While television advertising overall is declining, revenues for
digital-only free-to-air channels, such as ITV2, More4 and Five Life, is
rising and for the first time broke though the ?bn mark in 2006, a 21%
increase over 2005. Revenue for the three commercial terrestrial channels -
ITV1, Channel 4 and Channel 5 – stood at ?.4bn in 2006, 9.6% lower than in
2005.
As television advertising revenue declines, online advertising spending
continues to surge, up 47% during 2006 and just breaking the ?bn mark.
Internet advertising spend is now equivalent to almost half (44%) that spent
on all TV advertising, to 83% of advertising spend on ITV1, Channel 4 and
Five and to one quarter (24.2%) of all press advertising.
Telecoms and broadband
By April 2007 53% of UK households had a broadband connection. Headline
broadband speeds – the maximum advertised speed of a service – have doubled
over the last 12 months. The average blended headline broadband speed stood
at 3.6Mbit/s at the end of 2006 compared to 1.6Mbit/s in the previous year.
By June 2007 this had risen to 4.6Mbit/s.
The increase in headline speeds is due in part to continued investment and
growth in local loop unbundling which enables operators to install their own
equipment in BT’s exchanges and offer broadband services direct to
consumers. There has been a threefold increase in the proportion of
properties connected to an unbundled telephone exchange which are actually
taking an unbundled service, from 3% in March 2006 to 9% in March 2007.
Average headline speeds are also being boosted by ongoing investment in
infrastructure on both the BT and cable networks.
Competition in the provision of phone services is also increasing. Whilst
BT is diversifying its revenue streams in other areas, its share of fixed
voice call volumes fell below 50% for the first time in 2006 (48%) and the
company’s share of all telecoms connections (including mobile) fell below
one in four (23%, down from 26% a year ago).
Increased competition is driving down prices for consumers. Ofcom’s
analysis of the cost of a typical basket of residential telecoms services
(including a fixed line, two mobiles and a broadband connection per
household, all at 2006 usage levels) shows that consumers would have paid
?.51 (9%) more for the same bundle of services in 2005 than in 2006. In the
five years to 2006 the cost saving on the same bundle was ?4.97 in real
terms.
Radio
While the total number of radio stations in the UK has increased through
the expansion of DAB (in June 2007 there were 389 radio stations in the UK,
169 of which were available on DAB), the report shows that the total number
of radio listening hours declined to an average of 19.8 hours per week per
listener in 2006. This fell further to 19.4 hours in Q1 2007. This decline
has been felt most in the commercial local radio sector. Between April 2005
and April 2006, average listening to local commercial radio fell by 4.1%.
As listening has declined, so has commercial radio advertising revenue.
Between 2001 and 2006, radio’s share of total advertising revenue in the UK
fell by 14.3% and in 2006 stood at ?80m. Total revenue for local commercial
stations fell by 9.5% from ?69m in 2005 to ?53m in 2006.
By contrast, the report finds that people are increasingly tuning-in to
BBC radio. In the first three months of 2007, four out of the five most
listened to stations were all BBC. The top five were: BBC Radio 2, Radio 1,
Radio 4, Classic FM and Five Live.
The report also estimates that the BBC’s expenditure on radio, at ?37m in
2006, is at its highest level in five years. This compares to ?12m for the
commercial radio sector, at its lowest level since 2002.
Ofcom Partner of Strategy and Market Developments, Peter Phillips said:
“This comprehensive survey shows how our communications sector continues to
develop at a fast-pace, with consumers of all ages using a range of devices
to find the services they want at lower prices.” He added: “Industry
innovation and competition continue to deliver significant benefits to the
UK economy and consumers.”
Office of Communications (Ofcom)
